It’s an epic struggle of competing financial goals. In one corner you have the burden of debt. Whether it’s credit cards, auto loans, student loans, or even a mortgage, it’s money that eventually has to be repaid. Unless you’re fortunate enough to have no debt or only a mortgage, debt weighs on you and takes money away from other things. And in the other corner you have saving money. Regardless of your debt situation, everybody needs to save money. It could be to build an emergency fund, a down payment on a house, retirement, or even a college education. Whatever it is, it takes time and discipline.
This is where the problem lies. If you have both debt and a need to save money, how do you prioritize? Some people will pay off debt at all costs before saving a penny. Others will be fine getting by with minimum payments while dumping as much money into savings or investments as possible. While others try to do a little bit of both. That’s why the poll today asks how you view this subject.
For me personally, I’m a bit of a hybrid. I hate debt and want to make sure that revolving high-interest debt receives top priority, but at the same time I don’t feel that should completely take away from savings. As important paying off debt is, you still need to have a liquid safety net set aside and you can’t ignore long-term savings such as retirement completely. Time is also money, and every year you don’t put money aside is a year lost. So, I think it’s important to have a plan that allows you to structure your cash flow that will pay off the high-interest debt in a short amount of time while still maintaining the minimum debt payments on everything else, and still saving some money each month towards your emergency savings if you don’t have one, and contribute at least something to your retirement accounts. At the very least, enough to get any employer match in a 401(k) if you have one.
But that’s just me. Where do you stand, and why?
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.